Matters To Get Hotter For Pepsi, Coke Today

New Delhi, September 25: | Updated: Sep 26 2002, 05:30am hrs

In a hearing on Thursday, the Supreme Court will deliberate on what global cola majors Coke and Pepsi need to pay as punitive damages. This is an alltogether new dimension to the case involving defacing of ecologically sensitive rocks in Himachal Pradesh following reports in The Sunday Express and FE. The penalties announced so far have been limited to repair charges (of Rs 2 crore each slapped on Coke and Pepsi and Rs 1 crore on the state of Himachal Pradesh).

The quantum of punitive damages will be indicated by Harish N Salve, the amicus curiae, in the apex court on Thursday.

The new dimension is evident in an interim order of the court this Monday, where the SC says: A copy of the report of the central empowered committee is taken on record. The learned amicus curiae will inform the court on the next date of hearing (fixed subsequently to Thursday) as to how expenses which may come to Rs 5 crore are to be met by deposits by various persons who were responsible for defacing of rocks and putting up unauthorised hoardings. In addition the amicus curiae will indicate the quantum of punitive damages which have to be imposed.

What the amount of punitive damage be is up to the apex court A close look at the empowered committees suggested formula of 2 per cent of annual adspend provides a base figure. This, of course, is something the apex court may lower or raise at its discretion. For Coke, 2 per cent of its stated adspend of Rs 227 crore for the parent company and its subsidiaries, and an unstated amount spent by their bottlers and franchise, adds up to a possible punitive damage in the region of Rs 5 crore. For Pepsi the formula yields a base figure thats nearly similar.

The aspect of exemplary damage is evident in how the empowered committee has framed its recommendation: (The) recovery of exemplary damages and cost of restoration of the area, which has suffered ecological/ geological damages due to actions of the respondents (Coke, Pepsi) may be considered by the Honble Supreme Court. The committee recommends one time recovery of an amount equivalent to two per cent of the expenditure incurred, by each of the above named respondents, on advertisement and related activities in India during financial year 2001-02, including by their subsidiaries and or their franchise/ bottling agents...and the amount so recovered to be kept in a separate bank account for using exclusively for restoration, monitoring and protection work. Part of the funds may also be used for setting up an effective monitoring mechanism and preventive mechanism to deal with such problems in other important tourist destinations in Himachal Pradesh.

Why are the other accused not being asked to pay exemplary damages And why the parent company and not their bottlers or retailers are being made to pay On these two questions, it is being argued that companies other than Coke and Pepsi are still not respondents. Next, the principle being argued is linked to the paying capacity of the accused and the benefit the said global major will derive as opposed to some local advertiser. Finally, the case of exemplary damage has been established in the case of then environment and forests minister Kamal Nath.

For the two cola majors, the bad news doesnt end here. The repair part itself has thrown up new complications. It has been discovered that 50 per cent of the vandalised rocks are in river beds and cleaning the paint on them will release poisonous substances like lead in the waters. Also, many of the rocks have been subjected to extensive chiselling and scrappingas an after thought to escape the courts ireand 35 experts contacted by the empowered committee, including those in the UK and the Netherlands, have said that no restorative process is relevant in the situation. The damage is for ever.